Should I Outsource To A Property Management Company?

With all the hard work that goes into being a landlord, it’s sometimes smarter to outsource that work to a property management company.

Q: I am planning to buy a four-plex and I was planning on using an on-call handyman instead of property management which is typically expensive. Since this is my first project I wanted to know your thoughts and if you had any experience in this aspect of being a landlord.

A: It’s hard to know what to expect when you’re buying investment property for the first time, especially with residential real estate, which is a completely different type of investment than if you bought a big warehouse or even a small office building.

Professional property management is its own ball of wax, and you whether it works for you (or not) depends on a variety of things, not all of which are under your control.

But let’s start at the top. If you’re a hands-on investor and you’re skilled at maintaining real estate, you may save the money that you’d otherwise use for the management company and oversee the management of the property yourself.

Your on-call handyman (or woman) to handle repairs may only take care of the small fixes and repairs that are needed at the property. We’d encourage you to have a person like that help you out, but property managers do more than hiring people for repairs. They typically collect the receipt of rent, do the property bookkeeping, oversee repairs, handle leasing and deal with evictions.

You can’t compare having a repair person on call with a full-service management company. They’re two different animals. Instead, you should to decide what services you need from a management company then decide what you’d rather have done for you. If you plan on advertising the property for rent yourself and dealing with the tenants along with collecting the rent, the management company may not have much to do for you. You don’t want to pay a lot of money for nothing.

And, on the subject of paying, you should shop around to find out what charges and fees various management companies in your area charge for these sorts of services, if you have to take an all or nothing package or if you can pick and choose the services you want, and pay accordingly.

You’ll likely need more help than just a property manager. Knowing what the costs, expenses, income and other financial information for your investment is more than just knowing what the real estate tax, insurance and loan expenses are. When you hire a management company, those costs will reduce the net amount that you will get from the project. But, and this is a big but, if are planning to have a hands-off attitude towards your buildings and plan on buying a number of properties, you might want to get your feet wet with a property manager now to see how they handle your property and if you feel comfortable with the services you’re receiving for the price you’re paying..

But it all comes down to how much you want to be involved given the other priorities in your life. Thanks for your question, we hope our answer gets you started on thinking about these issues and you come to the best decision for your situation.